Price Discovery in Fragmented Markets

Frank de Jong and Peter C. Schotman

Journal of Financial Econometrics, 2010, vol. 8, issue 1, 1-28

Abstract: This paper proposes a structural time-series model for the intraday price dynamics on fragmented financial markets. We generalize the structural model of Hasbrouck (1993) to a multivariate setting. We discuss identification issues and propose a new measure for the contribution of each market to price discovery related to the Hasbrouck (1995) information shares. We apply the model to two sets of Nasdaq dealer quotes. Copyright The Author 2009. Published by Oxford University Press. All rights reserved. For Permissions, please e-mail: journals.permissions@oupjournals.org, Oxford University Press.

Date: 2010
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Working Paper: Price Discovery in Fragmented Markets (2003)
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